Express Scripts subpoenaed on drug contracts

Express Scripts Holding Co., the pharmacy benefit manager that bought Medco Health Solutions Inc., faces three subpoenas over its relationships with several drug makers, including one involved in a $44.3 million settlement stemming from allegations of false claims and kickbacks in the marketing of a multiple sclerosis drug.

St. Louis-based Express Scripts, which purchased Franklin Lakes-based Medco for $29.1 billion in April 2012, said it plans to cooperate with federal and state officials who have issued a total of three subpoenas since late February.

In total, the three inquiries relate to four drugs and five pharmaceutical makers, including Biogen Idec Inc., which has also just been subpoenaed.

During a first-quarter conference call Wednesday, Express Scripts Chief Executive Officer George Paz didn't offer any details on the subject of the subpoenas.

In the past few years, federal authorities have cracked down on drug manufacturers over the payment of kickbacks to doctors to promote medications, and over the marketing of drugs for so-called off-label use, or uses not approved by the Food and Drug Administration.

"With pharmaceutical benefit managers, one ongoing issue has been transparency over their relationships with pharmaceutical companies," said Christina S. Ho, an associate professor at Rutgers University Law School in Newark.

And with the advent of the federal Affordable Care Act, authorities also are taking a closer look at the pricing information, for possible fraud, that companies provide when they seek reimbursement from Medicaid and Medicare, she said.

During the conference call, Paz expressed optimism about the outcome of the subpoenas.

"We have very strong compliance programs here at Express Scripts, so I don't know where all these things take us or what they are looking for," Paz told analysts. "But I feel good about what we do, so we will just have to see how these things play out."

In a filing Tuesday with the Securities and Exchange Commission, Express Scripts said that on April 8 it received a subpoena from the U.S. Department of Labor's Employee Benefits Security Administration requesting information regarding its and Medco's client relationships from 2009 to the present.

As a pharmacy benefit manager, Express Scripts processes prescriptions for insurance companies and corporations, and uses its size as leverage to negotiate with drug makers and pharmacies.

Express Scripts also reported that on March 31 it received a subpoena from the attorney general of New Jersey requesting information about its and Medco's arrangements with AstraZeneca concerning the drug Nexium, a heartburn medication.

And prior to that, on Feb. 27, Express Scripts said it received a subpoena from the U.S. Department of Justice, District of Rhode Island, requesting information regarding its contractual arrangements with Pfizer Inc., Bayer AG, EMD Serono Inc. and Biogen concerning the drugs Betaseron, Rebif and Avonex, all of which are interferon drugs used to treat multiple sclerosis.

In its SEC filing, Express Scripts said it "is not able to predict with certainty the timing or outcome" of the subpoenas. In the past, the Justice Department has extracted hefty penalties from drug makers.

Three years ago, EMD Serono and other several other companies agreed to pay $44.3 million to resolve allegations regarding the marketing of Rebif. Serono was accused of paying health care providers to promote and prescribe the drug.

In November, Johnson & Johnson agreed to pay more than $2.2 billion. That resolved the company of criminal and civil liability arising from allegations of off-label marketing, and kickbacks being paid to doctors, for drugs such as Risperdal, an anti-psychotic.

The New Jersey Attorney General's Office referred questions on its Express Scripts subpoena to the state Division of Consumer Affairs, which declined to comment. The Department of Justice in Rhode Island and the U.S. Department of Labor also declined to comment.

In a regulatory filing last week, Biogen said it has received subpoenas.

"We have learned that state and federal governmental authorities are investigating our sales and promotional practices and have received related subpoenas," Biogen said in its filing. "We have also received a subpoena from the federal government for documents relating to our relationship with certain pharmacy benefit managers."

Biogen didn't name Express Scripts in its filing.

On Wednesday, Express Scripts' shares fell the most since November 2012 after the company cut its full-year forecast and said it received subpoenas regarding its relationships with drug makers. The shares declined 6.2 percent to $66.58 in New York.